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Optimizing the TALENT POOL
Best Practices for Driving a
Successful Talent Acquisition Strategy
in Any Economic Climate
With so many out-of-work people, finding qualified candidates should be easier than ever, right? There certainly is no shortage of individuals to choose from. According to a recent global trend report from the International Labor Office (ILO), the number of jobless people worldwide reached almost 212 million in 2009, and that number is expected to remain high in 2010.1 In the U.S., the Bureau of Labor Statistics indicates that the national unemployment rate continues to remain high.
However, an influx of people in the marketplace does not lessen the challenge of recruiting the right candidates with the right skills for the right job. While the number of people available to work has increased, the size of the talent pool has essentially remained the same. That is because regardless of the number of people applying for jobs, the distribution of average, good and great candidates in the talent pool remains unchanged. To illustrate, a Manpower Business Solutions client in the manufacturing sector had an open position for a senior level executive in the same location in April 2009 and again in March 2010. In 2009, 194 applicants applied within 23 days, of which 11.8 percent were qualified. In 2010, 73 applicants were received in 12 days, of which 12.3 percent were qualified. While the number of applicants varied, the availability of qualified candidates stayed relatively the same.
In a good economy it is challenging to find qualified candidates, but it can actually be even harder when economic conditions worsen and the number of people out of work increases. For recruiters and hiring managers, this translates to an increased volume of candidates and “mismatched” talent to review and screen in order to find those “right fit” candidates. In some cases, the individuals’ skills do not match those required for the jobs, or when the skills are appropriate, the individuals are not located where the jobs are.2
And it is not just the exponential growth of available workers that is adding to the evergreen challenge of finding qualified talent. In an ncertain economy, passive candidates who are currently employed may not consider leaving their current position. For one particular Manpower Business Solutions client, the number of qualified candidates who withdrew from the interview process after being fully screened nearly doubled from 2008 to 2009, with candidates citing a “decision to not make a career change at this time” as the reason for disengaging from
the recruiting process.
As economic conditions improve, having a blueprint for growth and thinking differently about talent acquisition strategies is what will help companies drive their businesses forward. More than half the respondents to a McKinsey Global Survey expect intensifying competition for talent – and the increasingly global nature of that competition – to have a major effect on their companies over the next several years.3
As organizations expand their global footprint, the need for a global talent pool and access to quality local talent to facilitate operations across borders and cultures is imperative to success. Organizations that understand how to optimize the talent pool – both globally and locally – will be able to effectively recruit and retain, driving a sustainable competitive advantage.
Deconstructing recruiting myths
With the abundance of talent in the marketplace, why has selecting qualified candidates gotten harder? Common myths around current recruiting efforts include:
Myth #1
There is no denying that there are historic numbers of people out of work. The recession took its toll in the form of job cuts, furloughs, and wage and benefit reductions in just about every industry, and some fields have been hit harder than others. The construction, manufacturing, retail, real estate and auto industries have been disproportionately affected by the recession, contributing to significant job loss across those sectors.4 As expected, hiring in those industries has dropped off and many of those jobs are likely gone for good. For job seekers, this means pursuing other industries or jobs outside their realm of experience.
However, the skill sets available from this population may not necessarily translate to a more widespread talent pool for positions in other industries. Although there is an abundance of talent available, skill sets may not align with the needs of industries that are predicted to experience rebound or growth such as education, health services, government, and business and professional services.5 According to Manpower’s annual Talent Shortage Survey, the top five positions employers are having most trouble filling globally remain unchanged:
skilled manual trades people, sales representatives, technicians (technical workers in the areas of production/operations, engineering and maintenance), engineers and management/executives.6
Changing population demographics and the number of baby boomers exiting the workforce have also impacted the availability of talent. The U.S. Census Bureau forecasts that the 65-and-over population will rise from 38.7 million in 2008 to 88.5 million by 2050.7 Similarly, several industrial nations, including Germany, Japan, Austria, Spain, Italy, Sweden, and Greece will also experience a contraction of their working populations. The decline of baby boomers in the global workforce has led some economists to predict labor shortages of 10-15 million in the coming decade.8 Market research firm IDC predicts that in the U.S. by 2016 there will be a three million person shortfall to satisfy workforce needs.9 Escalating numbers of college graduates are entering the workforce, but they will not possess the same knowledge
and skills as aging workers. This requires organizations to invest in training and
development to cultivate a workforce with the skills they require.
Take away:
If you are looking for a foreman or automotive mechanic, there might be plenty of candidates available. However, the specialized skills possessed by this demographic will not necessarily increase the talent pool for organizations seeking knowledge workers. For example, a Manpower Business Solutions client that is seeking an operations technician received 238 applicants. Of those, 22 met the minimum qualifications. In contrast, a position requiring more specific skills netted 34 candidates with only one candidate meeting the minimum
requirements.
Myth #2
There is an abundance of people with the exact skill set required for every position.
The truth is there is often a mismatch between the individuals available for work and the specific skills employers seek when recruiting for a specific position. An advertisement for an open position may net hundreds or even thousands of resumes, but how many of those applicants actually have the skills required for success? One Manpower Business Solutions client has 18,683 applicants in their applicant tracking system, but only 67 of them have experience in the relevant field. Some people might be very talented and impressive, but lack the right combination of skills required by an employer.
Geographic location may also influence the types of skills available in a particular area. Finding someone with significant life sciences experience may be achievable in a metropolitan area like New York City or North Carolina’s Triangle Park, but improbable in more remote locations without incurring significant relocation costs. Plus, if the industry in which you are recruiting does not have high turnover or has not been significantly affected by the economic downturn, there is a good chance potential candidates are employed elsewhere and not actively looking.
Take away:
Just because millions of people are unemployed, it does not mean the skills,education and experience that your company requires are available. With an abundance of candidates applying for each open position, recruiting gets harder, not easier.
Myth #3
It’s okay to be picky because talent is plentiful.
Defining workforce needs and where there are skill gaps is critical to successful recruiting. However, the pursuit of perfection is likely to paralyze recruiting efforts, yield fewer candidates and elongate the time to fill open positions. Hiring managers are focused on finding the person with the right fit – matching roles and responsibilities with requisite skill sets, competencies, and experiences along with behaviors and values that align with the organization’s mission, vision and values.10 When the definition of required skills is too narrow or restrictive it can significantly limit the qualified talent pool.
Structural unemployment as defined by economists is a disconnection between the skill sets prevalent in the labor pool and those demanded by employers. Employers may be intent on only hiring candidates whose background and capabilities are an exact match, but to broaden the talent pool they need to be realistic in assessing what is available in the marketplace. What’s more, it is not just the skills on a resume that define an ideal candidate, but their “soft skills” as well. Determining cultural fit and ability to learn is not something that can be gleaned during initial resume screening.
Instead, ‘fish where the fish are’ and consider those candidates with transferrable skills, knowledge and capabilities. Since jobs in manufacturing, construction, and professional and business services were hit hardest, there are likely more candidates from those industries applying for open positions. Think about how those types of skills might be able to benefit your organization. For example, someone who worked as a journeyman carpenter has developed supervisory skills and spent time training new employees. A construction foreman is likely
to have experience with purchasing and materials management, project analysis and planning, and transportation and logistics. Expanding the talent pool requires looking at the talent that is available and identifying comparable skills that will meet business needs.
Consider which competencies are required for open positions. Then take into account the other industries and occupations that could be the source of these portable skills.
Myth #4
Getting an extremely diverse workforce for every position is easily obtainable.
More organizations are adopting the practice of increasing diversity, but – as with the size of the talent pool – the proportion of diverse candidates does not change in turbulent times. As noted earlier, as baby boomers leave the workforce, knowledge and skills will leave with the retirees and the workforce is expected to steadily decline through 2050.11 These demographic changes can impact the availability of a diverse talent pool.
Some organizations may view diversity as synonymous with minority hires or complying with Affirmative Action. Instead, they need to encourage an environment of inclusivity and consider how providing culturally appropriate practices will increase recruitment and retention and deliver a competitive advantage. Expanding the pool of diverse candidates requires defining the rationale for having a diverse workforce and considering strategic hires from other industries to build organizational capabilities.
Organizations also need to understand the time it takes to produce a heterogeneous pool of candidates, particularly as demographics shift. For example, as in most countries, the field of engineering in the U.S. has been predominantly dominated by men. However, as a result of government and industry influence, educational institutions have been encouraged to increase the numbers of women and minorities pursing careers in engineering. Today women now earn almost half of the baccalaureate degrees awarded in science and engineering, more than 40 percent of the master’s degrees, and more than one-third of the doctoral degrees, according to a report from the NSF.12
Women in general are adding a new dimension to the global talent pool. According to research from the Center of Work-Life Policy, in emerging markets such as Brazil, Russia, India, China, and the United Arab Emirates women constitute a pool of highly qualified talent just waiting to be tapped.13 Organizations that look to the female talent pool as they expand into new markets can uncover vast new talent sources, support diversity goals and recruit more effectively.
Take away:
It takes longer to cultivate a diverse talent pool. Diverse candidate demographics need to exist for organizations to be able to tap in and attract and retain candidates with varied origins, perspectives and life experiences. Make sure you understand the business rationale for having a diverse workforce and create a culture that is inclusive.
Developing strong workforce strategies
Appreciating that the fundamentals of the talent pool do not change quickly, even in the face of a global recession, means you can then implement strategies to optimize the talent that is available. To harness the talent that is available around
the world and develop a pool of right-fit candidates that meet your business requirements:
Know what you need, but be flexible.
Define what you need but be willing to broaden the scope of skills and talents you are looking for based on what is available. Consider redesigning jobs so they become more engaging for the people undertaking them.
Identify individuals with transferable skills.
Think about candidates with comparable skills from other industries or expand your search by sourcing candidates in different geographies.
Hire for innate talents and be willing to invest in training.
You may find a candidate with the right attitude, experience, and problem-solving skills but who is lacking a certain certification or skill set. Once you have defined the skills and talents required for a position, prioritize the characteristics most important to get the job done and areas that can be successfully achieved through training.
Draw from the in-house talent pool.
Identify internal resources you can grow and nurture. Cross train your workforce so they are able to perform a broader variety of tasks.
Make diversity a reality.
To bolster diversity, make sure the organization culture will enable diverse employees to thrive. Be willing to invest in training so you can meet diversity goals. Identify and create alliances with national minority organizations or trade associations and target recruitment advertising to minority publications.
Build a candidate pipeline.
Finding qualified talent is complex and time consuming. Build bench strength by cultivating relationships with candidates whose skills align with your organization’s future needs. This way, when you have an open position, you can tap into a
readily accessible talent pool.
Consider partnering with a recruitment process outsourcing (RPO) provider to manage the influx of resumes, improve processes and deliver a better candidate experience. Recruitment process outsourcing is a form of business process outsourcing (BPO) where an employer elects to outsource all or part of its recruiting function.
RPO enables organizations to tap into expertise and additional
resources to efficiently find right-fit candidates. With experience across a broad range of industries, an RPO partner has valuable insight into a
variety of comparable skill sets and can alleviate the burden of sorting through mismatched candidates to find those individuals with the right
hard and soft skills. RPO providers can scale up or down to meet fluctuating business needs and have insight into the most effective recruiting strategies, helping organizations optimize the talent pool to meet their hiring needs. An RPO can conduct market analysis on population
demographics to deliver insight on diversity opportunities. With global capabilities, more companies are turning to RPO because it makes the recruiting process less expensive and more effective and efficient.
Optimizing the Talent Pool
Boom or bust, the strategic fundamentals of the overall talent pool change slowly — and that means the challenges of hiring in a “buyer’s market” for talent are every bit as great today as they are during stronger economic times. By leveraging the existing talent pool, nurturing global networks and investing in diversity, organizations can effectively mine new talent sources, build multicultural talent and be well-positioned for market success.
Effective recruitment results in hiring the right candidate for the right job and plays a strategic role in a company’s ability to develop new products and services and expand into new markets. Having the right resources to identify new sources of talent, efficiently screen out
mismatched candidates and build a strong talent pipeline is critical to the success of every organization’s recruiting efforts. By optimizing the talent pool, organizations can gain access to skills that support business goals, build bench strength and recruit effectively to enhance competitive advantage.
About the Author
SARAH PEIKER has over 17 years recruiting expertise in designing, implementing and delivering recruiting solutions. She joined Manpower
Business Solutions in April 2008 through the acquisition of CRI, a pure-play RPO company, where she led the CRI Consulting business and managed large RPO accounts. Sarah holds a Bachelor’s degree from Michigan State University.
The Importance of Pay Philosophies
Pay Philosophies
A pay philosophy is a company’s commitment to how it values employees. A consistent pay philosophy gives the company and the employee a frame of reference when discussing salary in a negotiation.
The goal of a pay philosophy is to attract, retain, and motivate employees. For companies in the private sector, this usually requires a competitive pay philosophy. For companies in the public sector, this means a well-rounded philosophy, with a focus on benefits and work life.
Companies attract, motivate, and retain through total compensation
The purpose of a good compensation philosophy is to attract, retain, and motivate good people. To accomplish these goals, companies use a mixture of the three main components of compensation: Base pay, also called salary; incentive pay, whether in the form of cash or non-cash award such as stock; and benefits, or non-financial rewards. A pay philosophy is a blend of all three, since the company must pay for whatever it delivers to employees.
For example, a company’s pay philosophy might be to offer salaries that are competitive in the market, or it might favor pay that is structured to attract employees rather than pay that helps to retain them. But few companies can afford to attract, motivate, and retain via generous compensation. The challenge is to create a pay program that acknowledges all three goals without exhausting resources.
As an example, suppose a small company with moderate cash resources is establishing a pay philosophy. The philosophy might look something like this:
* Pay a competitive base salary – not an aggressive one, but a salary comparable to what an employee could get somewhere else.
* Offer equity in the company to all employees, so that they can reap the rewards of the company.
* Be aggressive in total overall compensation through the use of the incentives. If, for example, an employee is below market by $20,000 in base pay, deliver market parity via a $5,000 signing bonus; a $5,000 retention bonus; and a $10,000 incentive. Incentive programs should be designed so that high-performance people get high compensation.
Lead-lag, lag-lead establishes timing of adjustments
Most companies review salaries once or twice a year, but the market moves continuously. Therefore, a company’s pay is likely to be at market value just once or twice a year, similar to the hands on a broken clock, which only tell the correct time twice a day.
As a consequence, companies must decide what time of year to offer raises, and whether to lead the market at the beginning of the year and lag behind at the end of the year; or to lag behind at the beginning of the year and lead at the end. These two approaches are called lead-lag and lag-lead.
Employee proficiency ties skills to market value
Some pay philosophies track the development of skills that lead to proficiency in a job. The more proficient an employee becomes, the closer to market value he or she gets. This is a way of paying according to a market based on the value of skills.
Paying for employee proficiency is in contrast to paying for longevity, which has fallen out of favor in many industries but prevails nevertheless. The formula for employee proficiency involves calculating a comparatio – the employee’s salary over market, defined as the median or some other control point. For example, if an employee earns $45,000 and the median for that job is $50,000, the employee has a comparatio of 90 percent.
An employee who has lingered at a comparatio of 90 percent is at risk of leaving the job. If the company is interested in retaining the employee, it won’t cost much to bring him or her up to market. If there is a reason the company doesn’t want to pay 100 percent of market for this job, for example if the employee is not yet fully proficient in the job, it might still make sense to pay the employee98 percent of market. In the example above, the company would pay $4,000 more to their current employee, who might well merit the full $50,000 anyway, to insure against the cost of hiring a new employee.
There are several advantages of the pay-for-proficiency method. Because pay is tied to the market value of a job, employees don’t get stuck with merit increases of just a few percentage points a year. Because the market value of a job is tied to skills, the conversation about compensation can begin from a level playing field: An assessment of how the employee compares on each of a number of measures of proficiency and skill.
Proficiency is not the same thing as performance. Someone who is not yet proficient at a job may still be learning some of the basic skills, especially after a promotion. Yet the employee’s performance may exceed expectations. Poor performers do not deliver on the expectations of the job, and companies do not typically retain these employees for long.
As employees become proficient in their jobs, it is important to keep them moving to the next level. Otherwise their pay will stagnate and they may become unmotivated or look elsewhere for a new challenge.
Program should be carried out consistently
By law, pay practices must be consistent, must not discriminate, and must not be arbitrary. Yet a pay philosophy may include different approaches for different types of employees.
For example, a company might decide to pay a competitive rate for most jobs and an aggressive rate for jobs that are especially difficult to fill and important to the bottom line. Such a company might pay its executives and its sales personnel at the 75th percentile and the rest of its employees at the 50th percentile.
A philosophy applied inconsistently can devalue employees and lead to trouble. For example, suppose a company established a flat rate of $9.90 per hour for nonexempt employees in a customer service role. The department had 200 percent turnover. Despite the published flat rate, some employees with college degrees successfully negotiated for $10 per hour or more, while employees with 20 years of experience faithfully assumed the flat rate was non-negotiable. Soon, three women over 40, a protected class under age discrimination laws, were earning less than three men who had just graduated from college. The manager’s defense when confronted with the disparity was that the women never asked for more.
Legal cases involving such discrepancies often center around the principle that it is more egregious to violate and be inconsistent with your own pay practice than it is to follow the law. In this example, correcting the discrepancy could cost the company tens of thousands of dollars. If the money isn’t in the budget, the department could be forced to lay people off or freeze salaries.
Communication is part of retention
Employers benefit from communicating their pay philosophies to employees, because a sound philosophy consistently applied creates a sense of fairness. Some companies advertise their pay structure as a recruitment and retention strategy. If a company publishes its pay philosophy anywhere, it should also tell any employee who asks.
Job candidates should also be aware of a company’s pay philosophy. If a company doesn’t have a pay philosophy, it will be easy to tell during the salary negotiation. Some companies even publish the philosophy in an employee handbook, and show employees where they are in relation to market. It makes more sense, during a salary negotiation, for an employer to say, “My final offer is $67,000, which is 100 percent of market,” than it does to say, “My final offer is $67,000, and I can’t pay a cent more.” Can’t usually means won’t.
It can be to a company’s benefit even to communicate a two-pronged pay philosophy where some jobs are compensated at more than the market rate. For example, one company with high turnover in its customer service department, a department critical to the company’s success, decided to compensate customer service representatives above market. Customer service people got better work spaces, incentive plans, and higher-than-market base pay. In communicating this change in philosophy to all employees, the CEO spoke candidly about the business reasons for the philosophy and the value to the company. Some employees thought the change was unfair, and left the company. But others respected the CEO for his honesty and fairness, and stayed. It became easier to hire and keep personnel for customer service jobs, and the plan succeeded.
Start the dialogue, involve senior management
If you have questions about the philosophy behind your compensation, ask your human resources department for a copy of the company’s pay philosophy. This should show you the link between your pay and the company’s overall compensation principles.
If your company does not yet have a pay philosophy, suggest that the human resources department establish one. Employees need to see the connection to understand their value. Pay philosophies are important for companies of all sizes and stages because without them entrepreneurs could end up underpaying or overpaying for employees. Both problems result in a cost for the company, either in turnover or high salaries. In most companies, a human resources person takes responsibility for compensation; in a small company, the CEO might become proficient in the principles of compensation.
When a new company is establishing a pay philosophy, senior management must be involved, and the philosophy must be strongly aligned with company objectives. The CEO and other senior management must understand the program, agree to it, and support it consistently in order for the effort to be successful and worthwhile. (Business.salary.com)
Talent Management & TBHRM 